DP18/6: Price discrimination in the cash savings market

On 25 July 2018, we published a Discussion Paper on price discrimination in the cash savings market. We are concerned that competition is not working well in the cash savings market, particularly for longstanding customers. We opened a discussion on options to address the harm, including the introduction of a basic savings rate (BSR).

Update on Discussion Paper

The Discussion Paper sets out a range of options to address issues faced by longstanding customers in the easy access cash savings market. These customers generally receive lower interest rates than those who opened their accounts more recently. One of the options we proposed was the introduction of a basic savings rate (BSR). We received responses from a variety of stakeholders, including banks, building societies, industry bodies and consumer organisations. These responses put forward a broad range of views on the nature and scope of the harm and the options to address the harm.

Since the publication of our Discussion Paper, Citizens Advice submitted a super-complaint to the Competition and Markets Authority (CMA) on the ‘loyalty penalty’ across a range of essential markets. The super-complaint echoed our concerns about the treatment of longstanding customers in the cash savings market. The CMA’s response to the super-complaint included several cross-market and market-specific recommendations. On cash savings, the CMA supported the idea of pricing-based interventions, including the introduction of a BSR. The CMA also recommended further work to consider the feasibility of extending Open Banking to savings, and collective switching.

Next steps

We are continuing to work closely with the CMA and other regulators across the full range of the CMA’s recommendations.

In our 2019/20 Business Plan, we set out our cross-sector priorities, which include setting out proposals for tackling price discrimination in cash savings, assessing the role and impact of Open Finance, and considering the role of a Duty of Care in our future approach to regulation. We are considering the responses to our Discussion Paper in this context, and we intend to publish either a Consultation Paper or Feedback Statement in the second half of this year, which will outline the feedback received and our next steps.